Spain, Italy Worries Re-Emerge, Torpedo Stocks

A political scandal in Spain and a rascal's renaissance in Italy combined Monday to send investors fleeing the EU for safer ground.

Spanish Prime Minister Mariano Rajoy is the focus of angry demands, mostly from opposition parties, that he resign amid bribery accusations. Rajoy denies the charges, but a political stalemate would do no good for one of the EU's crisis countries.

Also, Italy must cope with rising polls for three-time former Prime Minister Silvio Berlusconi as he campaigns for his center-right party for a late-February election.

Berlusconi is saddled with, among other things, a tax-fraud conviction, conflict-of-interest charges, sex-with-underage-prostitute charges, warm words for Benito Mussolini and a reputation as a guy who likes to have a good time.

Over the weekend, Berlusconi promised to repeal an unpopular property tax, one of the recent austerity measures, and to refund last year's payments. That's $5.4 billion for a cash-strapped country trying to maintain its access to credit markets.

Italy's 10-year Treasury yield rose 15 basis points to 4.48%, while Spain's surged 23 basis points to 5.44%. Both are at their highest since December.

And the euro, which had been climbing since late July, fell 1.26 cents to $1.3518.

With the EU's crises fading from world headlines, euro-centric markets have rebounded.

The euro bottomed in late July at $1.2040, and on Friday had reached as high as $1.3780. After battling for several years over fears that the currency might not survive, French Finance Minister Pierre Moscovici, concerned over the damage to export demand, said Sunday the euro was too strong.

Ishares MSCI Spain (EWP) ETF gapped down and fell 5.3% Monday. Volume swelled to 5-1/2 times its norm as the ETF logged its sixth-straight loss. That streak cost the ETF 10%.

Meanwhile, iShares MSCI Italy (EWI) ETF gapped down and fell 5.8%, although volume was far less explosive. The Italy ETF met support at its 50-day line, but Spain's ETF sliced through it for the first time since Nov. 21.

Spain and Italy have been red-hot for months, lifted by hopes that the crises were under control.

If iShares MSCI Spain were on the Daily World Map, it would be in first place by six-month calculations, with a 45.1% surge. Ishares MSCI Italy would be second with a 41.8% gain.

See Also

Stock ETFS gained Monday, calmed by signs of a breakthrough in Greece's debt talks with its creditors. European officials are optimistic that a deal to avoid a Greek default could be unlocked later this week. Oil prices rose on stock market news of new proposals from the island nation that may ...

London's FTSE 100 index snapped a five-day advance Thursday, while the CAC-40 index in Paris reversed early losses to add a seventh day to its uptrend. Frankfurt's DAX index also reversed, climbing 0.6% in its fourth gain in five days. The recent gains leave all three indexes near their January ...

Buyers returned to the market with considerable force Wednesday as Congress appeared to reach a compromise to prevent the world's No. 1 economy from missing its bond payments. The eleventh-hour bipartisan deal, forged in the Senate and headed for a vote in the Republican-dominated House of ...

Where are the global stock markets headed in fourth quarter and where should investors venture? Several investment strategists share their outlook and best ETF investing ideas for the final stretch of 2013. 1. iShares MSCI Italy (ARCA:EWI). Bill Witherell, chief global economist at Cumberland ...

09/27/2013 08:02 AM ET

More International Leaders Articles:

The coming week shows a busy reporting schedule for international stocks. Among those, six of IBD's Top 10 World Stocks are scheduled to deliver results. Dublin, Ireland-based drugmaker Mallinckrodt (NYSE:MNK) and Criteo (NASDAQ:CRTO), an online advertising services agency based in Paris, kick off ...

Drugmakers and related stocks have had a rough couple of weeks. The Amex Biotechnology Index has slipped a fraction so far this week, after falling nearly 5% from a high the week before. The iShares Nasdaq Biotech Fund (NASDAQ:IBB) was little changed for the week, after a 5% slide last week. Among ...

Baidu's (NASDAQ:BIDU) agonizing drop on Tuesday showed how short investors' fuses have grown with regard to China-based companies. Shares of the Internet search engine plunged to a 13-month low after Q2 profit missed views and the company gave soft guidance. But, in general, Chinese companies ...

Caesarstone (NASDAQ:CSTE) has pulled back to its 10-week moving average, providing a possible buying opportunity. This is its first test of the key support area since the stock broke out past a 63.05 buy point in early June. It rose 12% from that breakout before pulling back. But the market is ...

China's markets dipped on Friday, hurt by data suggesting that manufacturing slowed unexpectedly in July. The country's main indexes ended the week mixed, as mainland markets continued their state-managed rebound. The Shanghai composite rose 2.9% in its third straight weekly gain. The rise put it ...

About Investor's Business Daily

Investor’s Business Daily provides exclusive stock lists, investing data, stock market research, education and the latest financial and business news to help investors make more money in the stock market. All of IBD’s products and features are based on the CAN SLIM® Investing System developed by IBD’s Founder William J. O’Neil, who identified the seven common characteristics that winning stocks display before making huge price gains. Each letter of CAN SLIM represents one of those traits.

Select market data is provided by Interactive Data Corp. Real Time Services. Price and Volume data is delayed 20 minutes unless otherwise noted, is believed accurate but is not warranted or guaranteed by Interactive Data Corp. Real Time Services and is subject to Interactive Data Corp. Real Time Services terms. All times are Eastern United States. *Reflects real-time index prices.